Missouri regulators will require the state's farm-mutual companies to purchase reinsurance to protect their maximum annual loss of surplus for property risks, a response to the 2011 Joplin tornado that put one insurer in distress.

The Missouri Department of Insurance adopted new regulations this week that require farm-mutual companies to “carry enough reinsurance that future losses would not deplete its surplus by more than 20 percent in one year.”

Rural Missourians obtain their coverage from the state's farm-mutual companies if it is difficult for them to obtain coverage from traditional property and casualty insurers.

“Regulators and insurance-industry groups teamed up to strengthen this regulation, which is vitally needed,” says John M. Huff, director of the Missouri Department of Insurance in a statement. “This new requirement prevents farm mutuals from taking on more risk than they can handle. That protects their customers, who are mainly rural Missourians.”

The department says the new regulations, which take effect Jan. 1, 2013, received the support of industry groups.

Mark Johnston, state affairs manager for the National Association of Mutual Insurance Companies, says in an interview that the regulation affects the state's domiciled farm mutuals that typically have somewhere around $1 million to $2 million in premium. He adds that the regulation does not affect the major carriers.

At least two other states, Iowa and Illinois have similar regulations, he says.

Special Reports /

In Response to Joplin Tornado, Missouri Requires Reinsurance for Farm Mutuals

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